The appraisal of industrial property (refineries, gas processing plants and other manufacturing processes) involves understanding a myriad of petroleum and chemical industry processes along with their economic relationships to other market sectors.  Often the industrial property P&A appraises is an integral downstream partner to the oil and gas industry we are already appraising, sometimes even the same company, so that we are in a unique position to analyze the property with details specific to that property but in conjunction with a macro-economic outlook.

And as industry in Texas and other states is becoming more diverse every year, P&A industrial appraisers are correspondingly gaining appraisal expertise in non-petroleum industry manufacturing processes like cement plants, wallboard plants, peanut and other agricultural processing facilities, plastic injection molding plants, silicon wafer computer chip manufacturing, and construction of other consumer products and staples.

To appraise industrial properties, the Cost Approach based on the economic principle of substitution is the predominant method used for mass appraisal, although it can be argued that mass appraisal does not really exist for industrial property because of its wide diversity.  P&A industrial appraisers inspect facilities every year to verify inventory deletions and additions.  Industrial property is also subject to inflation and depreciation in all its forms.

The use of the Market Approach is limited in appraising industrial property since sales data of comparable properties is not readily available or in sufficient quantity for meaningful statistical analysis.  Nonetheless, many of the cost schedules that P&A uses, either commercially available or developed in-house, are derived from actual market data.  Sales of plants for purchase prices significantly different from net book value must be investigated for evidence of functional or economic obsolescence and intangible value that cannot be attributed to taxable property.

The Income Approach to value is applicable only to industrial properties that produce income.  Capitalization of typical net income or discounting of future net income can give appropriate indicators of market value.   However, the accuracy of this approach is limited to the ability to obtain accurate historical data from the company whose assets are being appraised and from which reasonable projections of future parameters can be made.  P&A industrial appraisers are trained to evaluate income potential, if necessary, to validate or otherwise reconcile with indications of value derived by cost and market analysis.

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